Multiple Discriminant Analysis of Corporate Bankruptcy

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "Multiple Discriminant Analysis of Corporate Bankruptcy"

Transcription

1 Multiple Discriminant Analysis of Corporate Bankruptcy In this paper, corporate bankruptcy is analyzed by employing the predictive tool of multiple discriminant analysis. Using several firm-specific metrics gauging qualitative and quantitative characteristics of a company, the multiple discriminant analysis successfully predicts bankruptcy up to five years in advance for a sample study of 111 firms. Further applications of multiple discriminant analysis in quantitative value investing and portfolio design strategy are also discussed, and potential areas of continued research are proposed. Background For any corporation or firm, a comprehensive and clear understanding of the business s current and projected performance is crucial on both an internal and external level. Clients and employees alike are interested in how the firm s profits, returns, and other significant indicators not only demonstrate its prevailing wellbeing, but also its potential for either failure or continued success. In this paper, we examine the predictability of bankruptcy in firms. The implementation of particular tools to measure a company s health has become a crucial element of quantitative investment research. However, the question of how exactly a company s wellbeing should be modeled, as well as the quantitative and qualitative effectiveness of any such tools present various complications in the analysis. After considering regressions across market history, we have focused on solvency metrics, debt metrics, efficiency metrics, and profitability metrics, as they continue to have a high degree of predictive power in indicating company failure or success.

2 Multiple Discriminant Analysis Reliance upon ratio analysis has historically drawn criticism for its overall univariate approach and consequential inability to fully address the correlations and interactions between potential indicators. Multiple discriminant analysis is another (perhaps more effective tool) that makes predictions in a particular context based on generally qualitative observations. Multiple discriminant analysis has been used across a spectrum of disciplines, from behavioral sciences to consumer credit evaluations. Numerous advantages arise when using multiple discriminant analysis, as opposed to ratio analysis. Multiple discriminant analysis enables a comprehensive analysis of multiple characteristics of a firm and their interactions, while ratio analysis solely permits a valuation of the indicators one at a time. Furthermore, multiple discriminant analysis reduces the number of variables from N to N-1 groups, where N is the number of initial groups. With this paper s particular focus on bankruptcy, the analysis occurs in only one dimension, as the two initial groups are the bankrupt and non-bankrupt firms. In this paper, we will implement multiple discriminant analysis to prioritize indicators of firm bankruptcy, determine the effect of each ratio in the analysis, and establish a method for measuring such effects. July 2014 Page2

3 Formula If we take all of the potential indicators, call them variables y1, y2, y3, yn and assign the calculated discriminant coefficients a1, a2, a3, an, we will establish a discriminant function formula that combines all the indicators and coefficients to equal an ultimate discriminant value, X. X = a1y1 + a2y2 + a3y3 + anyn Analysis of firms and their potential for bankruptcy will be analyzed using this discriminant function, and thus X will determine whether or not the firm will ultimately reach bankruptcy. Variables The variables included in the analysis are five financial metrics that would otherwise be analyzed in the univariate method of financial ratio analysis. These five metrics are not necessarily the most statistically significant independently, but are selected through measuring the statistical significance of alternative functions, evaluating the relative contributions of each variable, and evaluating the correlations among the variables. Using an F-test for equality of variance for each metric, the variables were generally deemed discriminating between the bankrupt and non-bankrupt groups. The determinant function thus includes the following properties of any firm: a liquidity metric, a cumulative profitability metric, a productivity metric, a solvency metric, and an efficiency metric. July 2014 Page3

4 The liquidity metric is a critical property of a firm to include and analyze, as it measures the firm s capacity to cover its financial liabilities in the short term. Generally, those companies experiencing losses also experience diminishing present assets in comparison to total assets. As a result, the metric in the discriminant function would be expected to decrease for those firms more likely to face bankruptcy. The cumulative profitability metric measures how much profit a firm makes on a relative scale to its total assets. This ratio is also unique in that it is affected by the particular age of a company those companies more recently established are more likely to have lower retained earnings than older businesses. The productivity metric measures earnings prior to any tax or interest reductions, thereby demonstrating how well a firm can generate earnings from its assets before any fees or obligations must be taken into account. The solvency metric marks a boundary between a firm s insolvency and solvency. By relating the market value of equity and total debt, the metric determines how much the firm s total equity and total debt can decline in value before the liabilities surpass the total assets (equity and total debt). The efficiency metric demonstrates a firm s assets ability to generate sales. This property is uniquely important for multiple discriminant analysis, as the metric becomes even more significant when analyzing its interactions with the other properties at once in a firm-competitive context. July 2014 Page4

5 As a general summary of the five properties, a firm that is less likely to experience bankruptcy should experience higher ratios for each of the properties. We expect these coefficients to be positive, and thus, the higher the X, the healthier the company. Results In a study of 111 sample firms divided by each group as discussed above (one group includes 53 public companies that filed for bankruptcy between , and the other group includes a 58 paired sample of public companies that still existed in 1976), a multiple discriminant analysis employed the five aforementioned properties and calculated each companies respective discriminant function and value (X). Much like a regression model with R2 measuring the predictive power of the indicators, a percentage was calculated of the total correct classifications of a firm (either bankrupt or not bankrupt) divided by the total number of firms (66). The first classification percentage was calculated for the 111 firms themselves, using the data that we used to derive the original discriminant function. Thus, we expect a very high percentage. Results show that 92.8% classifications were indeed correct. The next percentage was calculated using data from the firms two years prior to bankruptcy. 89% of the classifications were correct, indicating the predictive capability of the discriminant function even two years in advance. July 2014 Page5

6 To see how far back the multiple discriminant analysis could be utilized in predicting bankruptcy, percentages were also calculated for firms three, four, and five years prior. The results were 83.5%, 79.8%, and 76.8%, respectively. Past 5 years prior to bankruptcy, the percentages indicate the increasing temporal limitations of our model to a maximum of five years prior to filing for bankruptcy. In another study, 86 distressed firms from , 110 bankrupted companies from , and 120 bankrupted companies from were analyzed. The calculated accuracy percentage was between 82% and 94%. Aside from the percentages, the discriminant value (X) itself was calculated for each firm as well. Results showed that firms with X values above 2.99 will fall into the non-bankrupt group, while firms with X values below 1.81 are all bankrupt. To reconcile the range of X values between 1.81 and 2.99, the midpoint of a calculated critical value interval is used as the best discriminating marker between bankruptcy and non-bankruptcy: In the model, Type I errors occur when the X value does not predict bankruptcy, even though bankruptcy ultimately occurs. Type II errors occur when the X value predicts bankruptcy, and the firm does not experience bankruptcy. Further Applications Use of the multiple discriminant model of analysis has also been shown to be highly predictive in appraising particular investment criteria for both July 2014 Page6

7 portfolio and stock strategy. For quantitative value investing, an investor has the ability to potentially prevent making poor investment decisions by anticipating any declines in the relevant firms. If an investor is cognizant of such future declines, he should sell his stock in order to avoid further falling prices. Such a financial decision would be preventative of increased losses and provide greater capital for the individual to make alternative investment decisions. Further areas of research to explore in the analysis of corporate bankruptcy could be an examination of non-us firms, smaller, unincorporated firms, and firms across a wider range of industries. Another area for further research could be exploring multiple levels of bankruptcy to account for the associated, more realistic risks involved in bankruptcy, as opposed to the dichotomous classification of bankrupt vs. non-bankrupt firms. July 2014 Page7

30-1. CHAPTER 30 Financial Distress. Multiple Choice Questions: I. DEFINITIONS

30-1. CHAPTER 30 Financial Distress. Multiple Choice Questions: I. DEFINITIONS CHAPTER 30 Financial Distress Multiple Choice Questions: I. DEFINITIONS FINANCIAL DISTRESS c 1. Financial distress can be best described by which of the following situations in which the firm is forced

More information

BANKRUPTCY AND THE ALTMAN MODELS. CASE OF ALBANIA

BANKRUPTCY AND THE ALTMAN MODELS. CASE OF ALBANIA BANKRUPTCY AND THE ALTMAN MODELS. CASE OF ALBANIA Eni Numani Department of Finance, Faculty of Economy, University of Tirana, Tirana, Albania eninumani@feut.edu.al Abstract: This paper examines the univariate

More information

Application of the Z -Score Model with Consideration of Total Assets Volatility in Predicting Corporate Financial Failures from 2000-2010

Application of the Z -Score Model with Consideration of Total Assets Volatility in Predicting Corporate Financial Failures from 2000-2010 Application of the Z -Score Model with Consideration of Total Assets Volatility in Predicting Corporate Financial Failures from 2000-2010 June Li University of Wisconsin, River Falls Reza Rahgozar University

More information

Bankruptcy Prediction for Large and Small Firms in Asia: A Comparison of Ohlson and Altman

Bankruptcy Prediction for Large and Small Firms in Asia: A Comparison of Ohlson and Altman 第 一 卷 第 二 期 民 國 九 十 三 年 十 二 月 1-13 頁 Bankruptcy Prediction for Large and Small Firms in Asia: A Comparison of Ohlson and Altman Surapol Pongsatat Institute of International Studies, Ramkhamhaeng University,

More information

BUSM 411: Derivatives and Fixed Income

BUSM 411: Derivatives and Fixed Income BUSM 411: Derivatives and Fixed Income 2. Forwards, Options, and Hedging This lecture covers the basic derivatives contracts: forwards (and futures), and call and put options. These basic contracts are

More information

Final Exam MØA 155 Financial Economics Fall 2009 Permitted Material: Calculator

Final Exam MØA 155 Financial Economics Fall 2009 Permitted Material: Calculator University of Stavanger (UiS) Stavanger Masters Program Final Exam MØA 155 Financial Economics Fall 2009 Permitted Material: Calculator The number in brackets is the weight for each problem. The weights

More information

Credit Risk Analysis. Implementation of Credit Granting Decision. Credit Granting Decision

Credit Risk Analysis. Implementation of Credit Granting Decision. Credit Granting Decision Credit Risk Analysis Implementation of Credit Granting Decision Tied to corporate culture What level of risk is acceptable? What type of customer? Consumer Commercial Sovereign Credit Granting Decision

More information

Credit Analysis 10-1

Credit Analysis 10-1 Credit Analysis 10-1 10-2 Liquidity and Working Capital Basics Liquidity - Ability to convert assets into cash or to obtain cash to meet short-term obligations. Short-term - Conventionally viewed as a

More information

Chapter 11, Risk and Return

Chapter 11, Risk and Return Chapter 11, Risk and Return 1. A portfolio is. A) a group of assets, such as stocks and bonds, held as a collective unit by an investor B) the expected return on a risky asset C) the expected return on

More information

Seasoned Equity Offerings: Characteristics of Firms

Seasoned Equity Offerings: Characteristics of Firms International Journal of Business, Humanities and Technology Vol. 1 No. 3; November 2011 Abstract 26 Seasoned Equity Offerings: Characteristics of Firms Rebecca Abraham Professor, Huizenga School of Business-SBE

More information

High Yield Bonds A Primer

High Yield Bonds A Primer High Yield Bonds A Primer With our extensive history in the Canadian credit market dating back to the Income Trust period, our portfolio managers believe that there is considerable merit in including select

More information

SIX RED FLAG MODELS 1. Fraud Z-Score Model SGI Sales Growth Index x 0.892 GMI Gross Margin Index x 0.528 AQI Asset Quality Index x 0.

SIX RED FLAG MODELS 1. Fraud Z-Score Model SGI Sales Growth Index x 0.892 GMI Gross Margin Index x 0.528 AQI Asset Quality Index x 0. SIX RED FLAG MODELS Six different FFR detection models and ratios were used to develop a more comprehensive red flag approach in screening for and identifying financial reporting problems in publicly held

More information

CMAC meeting Agenda paper 2 Debt vs Equity

CMAC meeting Agenda paper 2 Debt vs Equity 17 October 2013 International Financial Reporting Standards CMAC meeting Agenda paper 2 Debt vs Equity Conceptual Framework The views expressed in this presentation are those of the presenter, not necessarily

More information

PREDICTION FINANCIAL DISTRESS BY USE OF LOGISTIC IN FIRMS ACCEPTED IN TEHRAN STOCK EXCHANGE

PREDICTION FINANCIAL DISTRESS BY USE OF LOGISTIC IN FIRMS ACCEPTED IN TEHRAN STOCK EXCHANGE PREDICTION FINANCIAL DISTRESS BY USE OF LOGISTIC IN FIRMS ACCEPTED IN TEHRAN STOCK EXCHANGE * Havva Baradaran Attar Moghadas 1 and Elham Salami 2 1 Lecture of Accounting Department of Mashad PNU University,

More information

Association between Accounting and Market-Based Variables A Canonical Correlation Approach with U.S. Data

Association between Accounting and Market-Based Variables A Canonical Correlation Approach with U.S. Data 1 Association between Accounting and Market-Based Variables A Correlation Approach with U.S. Data Timo Salmi, Ilkka Virtanen, Paavo Yli-Olli and Juha-Pekka Kallunki University of Vaasa P.O.Box 700 FIN-65101

More information

Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used:

Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used: Financial Ratios Financial ratios are useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios

More information

Managing High Yield public small caps with Robeco s corporate bond selection model COALA For professional investors only

Managing High Yield public small caps with Robeco s corporate bond selection model COALA For professional investors only ROCK note December 2010 Managing High Yield public small caps with Robeco s corporate bond selection model COALA For professional investors only By Sander Bus, CFA, portfolio manager Daniël Haesen, CFA,

More information

Society of Actuaries in Ireland

Society of Actuaries in Ireland Society of Actuaries in Ireland Information and Assistance Note LA-1: Actuaries involved in the Own Risk & Solvency Assessment (ORSA) under Solvency II Life Assurance and Life Reinsurance Business Issued

More information

CONSULTATION PAPER P016-2006 October 2006. Proposed Regulatory Framework on Mortgage Insurance Business

CONSULTATION PAPER P016-2006 October 2006. Proposed Regulatory Framework on Mortgage Insurance Business CONSULTATION PAPER P016-2006 October 2006 Proposed Regulatory Framework on Mortgage Insurance Business PREFACE 1 Mortgage insurance protects residential mortgage lenders against losses on mortgage loans

More information

American Society of Appraisers. ASA Business Valuation Standards

American Society of Appraisers. ASA Business Valuation Standards American Society of Appraisers Business Valuation Standards This release of the approved Business Valuation Standards of the American Society of Appraisers contains all standards approved through February,

More information

Understanding a Firm s Different Financing Options. A Closer Look at Equity vs. Debt

Understanding a Firm s Different Financing Options. A Closer Look at Equity vs. Debt Understanding a Firm s Different Financing Options A Closer Look at Equity vs. Debt Financing Options: A Closer Look at Equity vs. Debt Business owners who seek financing face a fundamental choice: should

More information

Meet challenges head on

Meet challenges head on Meet challenges head on Deal Advisory / Global We can help you master Financial Restructuring. Enhancing value through financial restructuring. / 1 Your vision. Our proven capabilities. Despite its challenges,

More information

Return on Equity has three ratio components. The three ratios that make up Return on Equity are:

Return on Equity has three ratio components. The three ratios that make up Return on Equity are: Evaluating Financial Performance Chapter 1 Return on Equity Why Use Ratios? It has been said that you must measure what you expect to manage and accomplish. Without measurement, you have no reference to

More information

EARLY WARNING INDICATOR FOR TURKISH NON-LIFE INSURANCE COMPANIES

EARLY WARNING INDICATOR FOR TURKISH NON-LIFE INSURANCE COMPANIES EARLY WARNING INDICATOR FOR TURKISH NON-LIFE INSURANCE COMPANIES Dr. A. Sevtap Kestel joint work with Dr. Ahmet Genç (Undersecretary Treasury) Gizem Ocak (Ray Sigorta) Motivation Main concern in all corporations

More information

Rating Methodology by Sector. Life Insurance

Rating Methodology by Sector. Life Insurance Last Updated: July 1, 2013 Rating Methodology by Sector Life Insurance The following mainly applies to life insurance companies in Japan. The credit ratings of a life insurance company is assessed by focusing

More information

Chapter 5: Business Valuation (Market Approach)

Chapter 5: Business Valuation (Market Approach) Chapter 5: Business Valuation (Market Approach) This methodology values larger companies based upon the value of similar publicly traded For smaller companies, otherwise known as micro businesses (e.g.,

More information

NorthCoast Investment Advisory Team 203.532.7000 info@northcoastam.com

NorthCoast Investment Advisory Team 203.532.7000 info@northcoastam.com NorthCoast Investment Advisory Team 203.532.7000 info@northcoastam.com NORTHCOAST ASSET MANAGEMENT An established leader in the field of tactical investment management, specializing in quantitative research

More information

Evaluation on Hybrid Capital of Life Insurance Companies

Evaluation on Hybrid Capital of Life Insurance Companies 06-D-417 September 1, 2006 Evaluation on Hybrid Capital of Life Insurance Companies Japan Credit Rating Agency (JCR) has summarized below the basic perspectives and standards for the evaluation of hybrid

More information

Dr. Edward I. Altman Stern School of Business New York University

Dr. Edward I. Altman Stern School of Business New York University Dr. Edward I. Altman Stern School of Business New York University Problems With Traditional Financial Ratio Analysis 1 Univariate Technique 1-at-a-time 2 No Bottom Line 3 Subjective Weightings 4 Ambiguous

More information

SSAP 24 STATEMENT OF STANDARD ACCOUNTING PRACTICE 24 ACCOUNTING FOR INVESTMENTS IN SECURITIES

SSAP 24 STATEMENT OF STANDARD ACCOUNTING PRACTICE 24 ACCOUNTING FOR INVESTMENTS IN SECURITIES SSAP 24 STATEMENT OF STANDARD ACCOUNTING PRACTICE 24 ACCOUNTING FOR INVESTMENTS IN SECURITIES (Issued April 1999) The standards, which have been set in bold italic type, should be read in the context of

More information

Interpretation of Financial Statements

Interpretation of Financial Statements Interpretation of Financial Statements Author Noel O Brien, Formation 2 Accounting Framework Examiner. An important component of most introductory financial accounting programmes is the analysis and interpretation

More information

Stock Valuation. Everything You Wanted to Know About Stocks. and Their Value. FINC 3610 Yost

Stock Valuation. Everything You Wanted to Know About Stocks. and Their Value. FINC 3610 Yost Everything You Wanted to Know About Stocks and Their Value 158 Let s Review The price (value) of a bond is equal to the of the bond's cash flows. 159 Stock Valuation The price (value) of a share of stock

More information

RELEVANT TO ACCA QUALIFICATION PAPER F9

RELEVANT TO ACCA QUALIFICATION PAPER F9 RELEVANT TO ACCA QUALIFICATION PAPER F9 Analysing the suitability of financing alternatives The requirement to analyse suitable financing alternatives for a company has been common in Paper F9 over the

More information

Financial Condition Analysis Model

Financial Condition Analysis Model Financial Condition Analysis Model GOVERNMENTAL ACTIVITIES & ENTERPRISE FUNDS Economic resources and accrual basis of accounting Flow Financial Dimension Financial Indicator Interpretation Interperiod

More information

Participant Protections for Defined Benefit Plan Benefits: Benefit Security

Participant Protections for Defined Benefit Plan Benefits: Benefit Security TOPICS IN Pension risk management Participant Protections for Defined Benefit Plan Benefits: Benefit Security As persistent economic and related market factors continue to keep volatility front and center

More information

INSURANCE RATING METHODOLOGY

INSURANCE RATING METHODOLOGY INSURANCE RATING METHODOLOGY The primary function of PACRA is to evaluate the capacity and willingness of an entity / issuer to honor its financial obligations. Our ratings reflect an independent, professional

More information

FINANCIAL PERFORMANCE AND BANKRUPTCY ANALYSIS FOR SELECT PARAMEDICAL COMPANIES AN EMPERICAL ANALYSIS MAHESH KUMAR.T ANAND SHANKAR RAJA.

FINANCIAL PERFORMANCE AND BANKRUPTCY ANALYSIS FOR SELECT PARAMEDICAL COMPANIES AN EMPERICAL ANALYSIS MAHESH KUMAR.T ANAND SHANKAR RAJA. FINANCIAL PERFORMANCE AND BANKRUPTCY ANALYSIS FOR SELECT PARAMEDICAL COMPANIES AN EMPERICAL ANALYSIS MAHESH KUMAR.T ANAND SHANKAR RAJA. M ** Ph.D **Research scholar, School of commerce, Bharathiar University,

More information

Rating Methodology by Sector. Life Insurance

Rating Methodology by Sector. Life Insurance Last Updated: March 26, 2012 Rating Methodology by Sector Life Insurance *This rating methodology is a modification of the rating methodology made public on July 13, 2011, and modifications are made to

More information

Predicting Bankruptcy with Robust Logistic Regression

Predicting Bankruptcy with Robust Logistic Regression Journal of Data Science 9(2011), 565-584 Predicting Bankruptcy with Robust Logistic Regression Richard P. Hauser and David Booth Kent State University Abstract: Using financial ratio data from 2006 and

More information

ICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION

ICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION ICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION OCTOBER 2006 Table of Contents 1. INTRODUCTION... 3 2. FINANCIAL RATIOS FOR COMPANIES (INDUSTRY - COMMERCE - SERVICES) 4 2.1 Profitability Ratios...4 2.2 Viability

More information

Understanding Financial Information for Bankruptcy Lawyers Understanding Financial Statements

Understanding Financial Information for Bankruptcy Lawyers Understanding Financial Statements Understanding Financial Information for Bankruptcy Lawyers Understanding Financial Statements In the United States, businesses generally present financial information in the form of financial statements

More information

ABOUT FINANCIAL RATIO ANALYSIS

ABOUT FINANCIAL RATIO ANALYSIS ABOUT FINANCIAL RATIO ANALYSIS Over the years, a great many financial analysis techniques have developed. They illustrate the relationship between values drawn from the balance sheet and income statement

More information

Call Price as a Function of the Stock Price

Call Price as a Function of the Stock Price Call Price as a Function of the Stock Price Intuitively, the call price should be an increasing function of the stock price. This relationship allows one to develop a theory of option pricing, derived

More information

Moody s Short-Term Insurance Financial Strength Ratings

Moody s Short-Term Insurance Financial Strength Ratings November 1999 Special Comment Summary Contact New York Phone Robert Riegel 1.212.553.1653 Moody s Short-Term Insurance Financial Strength Ratings Moody s is introducing short-term insurance financial strength

More information

Statement. Investment Policies and Procedures. for. Ontario Teachers Pension Plan ( SIPP ) November 16, 2012

Statement. Investment Policies and Procedures. for. Ontario Teachers Pension Plan ( SIPP ) November 16, 2012 Statement of Investment Policies and Procedures for Ontario Teachers Pension Plan ( SIPP ) November 16, 2012 TABLE OF CONTENTS Section 1 Purpose... 1 1.1 Description of the Ontario Teachers' Pension Plan...

More information

Discussion Board Articles Ratio Analysis

Discussion Board Articles Ratio Analysis Excellence in Financial Management Discussion Board Articles Ratio Analysis Written by: Matt H. Evans, CPA, CMA, CFM All articles can be viewed on the internet at www.exinfm.com/board Ratio Analysis Cash

More information

McKinley Capital U.S. Equity Income Prospects for Performance in a Changing Interest Rate Environment

McKinley Capital U.S. Equity Income Prospects for Performance in a Changing Interest Rate Environment March 25, 2014 McKinley Capital U.S. Equity Income Prospects for Performance in a Changing Interest Rate Environment This paper analyzes the historic performance of the McKinley Capital Management, LLC

More information

What Do Short-Term Liquidity Ratios Measure? What Is Working Capital? How Is the Current Ratio Calculated? How Is the Quick Ratio Calculated?

What Do Short-Term Liquidity Ratios Measure? What Is Working Capital? How Is the Current Ratio Calculated? How Is the Quick Ratio Calculated? What Do Short-Term Liquidity Ratios Measure? What Is Working Capital? HOCK international - 2004 1 HOCK international - 2004 2 How Is the Current Ratio Calculated? How Is the Quick Ratio Calculated? HOCK

More information

Solvency II and Money Market Funds

Solvency II and Money Market Funds Solvency II and Money Market Funds FOR INSTITUTIONAL INVESTORS ONLY NOT FOR USE BY OR DISTRIBUTION TO RETAIL INVESTORS Background The new European insurance regulatory framework, Solvency II, will require

More information

Apartment Trust of America, Inc. (Exact Name of Registrant as Specified in Its Charter)

Apartment Trust of America, Inc. (Exact Name of Registrant as Specified in Its Charter) 8-K 1 d270012d8k.htm FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date

More information

AMERICAN REGISTRY OF INTERNET NUMBERS INVESTMENT POLICY STATEMENT January 2014

AMERICAN REGISTRY OF INTERNET NUMBERS INVESTMENT POLICY STATEMENT January 2014 AMERICAN REGISTRY OF INTERNET NUMBERS INVESTMENT POLICY STATEMENT January 2014 Introduction This statement of investment policy has been adopted by the Board of Trustees of the American Registry of Internet

More information

Course 1: Evaluating Financial Performance

Course 1: Evaluating Financial Performance Excellence in Financial Management Course 1: Evaluating Financial Performance Prepared by: Matt H. Evans, CPA, CMA, CFM This course provides a basic understanding of how to use ratio analysis for evaluating

More information

APB ETHICAL STANDARDS GLOSSARY OF TERMS

APB ETHICAL STANDARDS GLOSSARY OF TERMS APB ETHICAL STANDARDS GLOSSARY OF TERMS (Revised December 2010) accounting services The provision of services that involve the maintenance of accounting records or the preparation of financial statements

More information

Assessing Credit Risk for a Ghanaian Bank Using the Black- Scholes Model

Assessing Credit Risk for a Ghanaian Bank Using the Black- Scholes Model Assessing Credit Risk for a Ghanaian Bank Using the Black- Scholes Model VK Dedu 1, FT Oduro 2 1,2 Department of Mathematics, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana. Abstract

More information

International Financial Reporting for Insurers: IFRS and U.S. GAAP September 2009 Session 25: Solvency II vs. IFRS

International Financial Reporting for Insurers: IFRS and U.S. GAAP September 2009 Session 25: Solvency II vs. IFRS International Financial Reporting for Insurers: IFRS and U.S. GAAP September 2009 Session 25: Solvency II vs. IFRS Simon Walpole Solvency II Simon Walpole Solvency II Agenda Introduction to Solvency II

More information

EQUITY SHARES 1. INTRODUCTION

EQUITY SHARES 1. INTRODUCTION EQUITY SHARES POLICY STATEMENT Small Business Venture Capital Act s. 1(1), 8, 10, 12, 28.3, 28.93 of the Act; s. 1(3.1), 1(3.2), 3(1) and 3.2 of the Regulations 1. INTRODUCTION 1.1 Purpose and Application

More information

mba morten beyer & agnew

mba morten beyer & agnew Business Valuation: How to Make the Most of Your Business Pooja Gardemal, CPA/ABV Vice President Business Valuation & Economic Analysis 1 About is a global consulting firm with offices in the U.S. and

More information

Mortgage and Asset Backed Securities Investment Strategy

Mortgage and Asset Backed Securities Investment Strategy Mortgage and Asset Backed Securities Investment Strategy Traditional fixed income has enjoyed an environment of falling interest rates over the past 30 years. Average of 10 & 30 Year Treasury Yields (1981

More information

A Shortcut to Calculating Return on Required Equity and It s Link to Cost of Capital

A Shortcut to Calculating Return on Required Equity and It s Link to Cost of Capital A Shortcut to Calculating Return on Required Equity and It s Link to Cost of Capital Nicholas Jacobi An insurance product s return on required equity demonstrates how successfully its results are covering

More information

for Analysing Listed Private Equity Companies

for Analysing Listed Private Equity Companies 8 Steps for Analysing Listed Private Equity Companies Important Notice This document is for information only and does not constitute a recommendation or solicitation to subscribe or purchase any products.

More information

Fundamental analysis

Fundamental analysis Fundamental analysis 2 June 2016 CERN Finance Club c.laner@cern.ch Introduction Let s cover the two main types of investment analysis used in traditional investing Today: Fundamental analysis Next time:

More information

Case 5:12-cv-01648-R-DTB Document 166-1 Filed 06/02/14 Page 13 of 24 Page ID #:3461

Case 5:12-cv-01648-R-DTB Document 166-1 Filed 06/02/14 Page 13 of 24 Page ID #:3461 Case 5:12-cv-01648-R-DTB Document 166-1 Filed 06/02/14 Page 13 of 24 Page ID #:3461 AGREEMENT CONCERNING FIDUCIARY ENGAGEMENTS AND PROCESS REQUIREMENTS FOR EMPLOYER STOCK TRANSACTIONS The Secretary of

More information

Mizuho Economic Outlook & Analysis

Mizuho Economic Outlook & Analysis Mizuho Economic Outlook & Analysis May 2, 2016 The impact of the fall of interest rates upon retirement benefit obligations of Japanese corporate enterprises While the impact on a macro basis will likely

More information

AXA s approach to Asset Liability Management. HELVEA Insurance Capital Adequacy and Solvency Day April 28th, 2005

AXA s approach to Asset Liability Management. HELVEA Insurance Capital Adequacy and Solvency Day April 28th, 2005 AXA s approach to Asset Liability Management HELVEA Insurance Capital Adequacy and Solvency Day April 28th, 2005 ALM in AXA has always been based on a long-term view Even though Solvency II framework is

More information

Financial Statement Analysis: An Introduction

Financial Statement Analysis: An Introduction Financial Statement Analysis: An Introduction 2014 Level I Financial Reporting and Analysis IFT Notes for the CFA exam Contents 1. Introduction... 3 2. Scope of Financial Statement Analysis... 3 3. Major

More information

EVALUATION OF FINANCIAL HEALTH OF MMTC OF INDIA: A Z SCORE MODEL

EVALUATION OF FINANCIAL HEALTH OF MMTC OF INDIA: A Z SCORE MODEL EVALUATION OF FINANCIAL HEALTH OF MMTC OF INDIA: A Z SCORE MODEL Nilanjana Kumari Faculty of Commerce, Banaras Hindu University, Varanasi, U.P., India-2215 Abstract: Financial position of any company can

More information

Brookfield financial Review q2 2010

Brookfield financial Review q2 2010 Brookfield financial Review q2 2010 Overview Operating cash flow and gains totalled $327 million in the second quarter or $0.53 per share compared to $294 million in the prior year. This brings operating

More information

Spectrum Insights. Time to float. Why invest in corporate bonds? - Value

Spectrum Insights. Time to float. Why invest in corporate bonds? - Value Spectrum Insights Damien Wood, Principal JUNE 25, 2015 Time to float Investing in floating rate bonds as opposed to fixed rate bonds helps protect bond investors from price slumps. Spectrum expects that

More information

The Purchase Price in M&A Deals

The Purchase Price in M&A Deals The Purchase Price in M&A Deals Question that came in the other day In an M&A deal, does the buyer pay the Equity Value or the Enterprise Value to acquire the seller? What does it mean in press releases

More information

Accurately and Efficiently Measuring Individual Account Credit Risk On Existing Portfolios

Accurately and Efficiently Measuring Individual Account Credit Risk On Existing Portfolios Accurately and Efficiently Measuring Individual Account Credit Risk On Existing Portfolios By: Michael Banasiak & By: Daniel Tantum, Ph.D. What Are Statistical Based Behavior Scoring Models And How Are

More information

Bankruptcy Prediction Model for Listed Companies in Romania

Bankruptcy Prediction Model for Listed Companies in Romania IBIMA Publishing Journal of Eastern Europe Research in Business & Economics http://www.ibimapublishing.com/journals/jeerbe/jeerbe.html Vol. 2012 (2012), Article ID 381337, 10 pages DOI: 10.5171/2012.381337

More information

Fourteenth Meeting of the IMF Committee on Balance of Payments Statistics Tokyo, Japan, October 24-26, 2001

Fourteenth Meeting of the IMF Committee on Balance of Payments Statistics Tokyo, Japan, October 24-26, 2001 BOMCOM-01/22 Fourteenth Meeting of the IMF Committee on Balance of Payments Statistics Tokyo, Japan, October 24-26, 2001 Mutual Funds and Fund of Funds : Portfolio Investment or Direct Investment? Prepared

More information

Indxx SuperDividend U.S. Low Volatility Index

Indxx SuperDividend U.S. Low Volatility Index www.indxx.com Indxx SuperDividend U.S. Low Volatility Index Methodology May 2015 INDXX, LLC has been granted a license by Global X Management Company LLC to use SuperDividend. SuperDividend is a trademark

More information

Five Things To Know About Shares

Five Things To Know About Shares Introduction Trading in shares has become an integral part of people s lives. However, the complex world of shares, bonds and mutual funds can be intimidating for many who still do not know what they are,

More information

Micro Simulation Study of Life Insurance Business

Micro Simulation Study of Life Insurance Business Micro Simulation Study of Life Insurance Business Lauri Saraste, LocalTapiola Group, Finland Timo Salminen, Model IT, Finland Lasse Koskinen, Aalto University & Model IT, Finland Agenda Big Data is here!

More information

Delphi Management, Inc. Firm Brochure (Part 2A of Form ADV)

Delphi Management, Inc. Firm Brochure (Part 2A of Form ADV) Item 1. Cover Page Delphi Management, Inc. Firm Brochure (Part 2A of Form ADV) This brochure provides information about the qualifications and business practices of Delphi Management, Inc. ( Delphi ).

More information

General Methodology. Last Updated: December 3, 2012

General Methodology. Last Updated: December 3, 2012 Last Updated: December 3, 2012 General Methodology 1. Introduction The following is a general methodology for structured finance rating, which replaces and updates Outline and Rating Points of Structured

More information

A guide to investing in hybrid securities

A guide to investing in hybrid securities A guide to investing in hybrid securities Before you make an investment decision, it is important to review your financial situation, investment objectives, risk tolerance, time horizon, diversification

More information

Factors Influencing Price/Earnings Multiple

Factors Influencing Price/Earnings Multiple Learning Objectives Foundation of Research Forecasting Methods Factors Influencing Price/Earnings Multiple Passive & Active Asset Management Investment in Foreign Markets Introduction In the investment

More information

Relationships between Speculative-Grade Liquidity Ratings and Credit Default Swap Spreads

Relationships between Speculative-Grade Liquidity Ratings and Credit Default Swap Spreads Special Comment July 2005 Contact Phone New York Richard Cantor 1.212.553.1653 Christopher Mann Relationships between Speculative-Grade Liquidity Ratings and Credit Default Swap Spreads Contents: Summary

More information

LVIP Dimensional Non-U.S. Equity RPM Fund. Summary Prospectus April 30, 2013

LVIP Dimensional Non-U.S. Equity RPM Fund. Summary Prospectus April 30, 2013 LVIP Dimensional Non-U.S. Equity RPM Fund (formerly LVIP Dimensional Non-U.S. Equity Fund) (Standard and Service Class) Summary Prospectus April 30, 2013 Before you invest, you may want to review the Fund

More information

Predicting Bankruptcy: Evidence from Israel

Predicting Bankruptcy: Evidence from Israel International Journal of Business and Management Vol. 5, No. 4; April 10 Predicting cy: Evidence from Israel Shilo Lifschutz Academic Center of Law and Business 26 Ben-Gurion St., Ramat Gan, Israel Tel:

More information

Compare and Contrast of Option Decay Functions. Nick Rettig and Carl Zulauf *,**

Compare and Contrast of Option Decay Functions. Nick Rettig and Carl Zulauf *,** Compare and Contrast of Option Decay Functions Nick Rettig and Carl Zulauf *,** * Undergraduate Student (rettig.55@osu.edu) and Professor (zulauf.1@osu.edu) Department of Agricultural, Environmental, and

More information

Stocks Basics Florida International University College of Business State Farm Financial Literacy Lab http://www.business.fiu.edu/sffll 305-348-1542

Stocks Basics Florida International University College of Business State Farm Financial Literacy Lab http://www.business.fiu.edu/sffll 305-348-1542 Stocks Basics Florida International University College of Business State Farm Financial Literacy Lab http://www.business.fiu.edu/sffll 305-348-1542 1 Stocks Stocks are the most popular and known to be

More information

Credit Risk Models. August 24 26, 2010

Credit Risk Models. August 24 26, 2010 Credit Risk Models August 24 26, 2010 AGENDA 1 st Case Study : Credit Rating Model Borrowers and Factoring (Accounts Receivable Financing) pages 3 10 2 nd Case Study : Credit Scoring Model Automobile Leasing

More information

CLASS TIME & ROOM: Mondays and Wednesdays, 10:50 to 12:05 in M1040 (class) and breakout rooms: M1062, 64, 68, 70, 72 and 73

CLASS TIME & ROOM: Mondays and Wednesdays, 10:50 to 12:05 in M1040 (class) and breakout rooms: M1062, 64, 68, 70, 72 and 73 Page 1 of 3 SYLLABUS Management 3441A Financial Analysis University of Lethbridge Fall 2012 Instructor: Wilf Roesler Telephone: 329-5185 Email: w.roesler@uleth.ca Office Hours (M4147): Mondays 12:30 to

More information

Empirical Analysis on the impact of working capital management. Hong ming, Chen & Sha Liu

Empirical Analysis on the impact of working capital management. Hong ming, Chen & Sha Liu Empirical Analysis on the impact of working capital management Hong ming, Chen & Sha Liu (School Of Economics and Management in Changsha University of Science and Technology Changsha, Hunan, China 410076)

More information

Assurance and accounting A Guide to Financial Instruments for Private

Assurance and accounting A Guide to Financial Instruments for Private june 2011 www.bdo.ca Assurance and accounting A Guide to Financial Instruments for Private Enterprises and Private Sector t-for-profit Organizations For many entities adopting the Accounting Standards

More information

Citibank Japan, LTD ( CJL ) 2-3-14 Higashi-shinagawa, Shinagawa-ku, Tokyo Representative Director, President & CEO Darren Buckley

Citibank Japan, LTD ( CJL ) 2-3-14 Higashi-shinagawa, Shinagawa-ku, Tokyo Representative Director, President & CEO Darren Buckley Financial Publication for Fiscal Year Ended March 31, 2009 June 30, 2009 Citibank Japan, LTD ( CJL ) 2-3-14 Higashi-shinagawa, Shinagawa-ku, Tokyo Representative Director, President & CEO Darren Buckley

More information

American Society of Appraisers. ASA Business Valuation Standards

American Society of Appraisers. ASA Business Valuation Standards American Society of Appraisers ASA Business Valuation Standards This release of the approved of the American Society of Appraisers contains all standards approved through November 2009, and is to be used

More information

The Business Credit Index

The Business Credit Index The Business Credit Index April 8 Published by the Credit Management Research Centre, Leeds University Business School April 8 1 April 8 THE BUSINESS CREDIT INDEX During the last ten years the Credit Management

More information

Financial Ratio Cheatsheet MyAccountingCourse.com PDF

Financial Ratio Cheatsheet MyAccountingCourse.com PDF Financial Ratio Cheatsheet MyAccountingCourse.com PDF Table of contents Liquidity Ratios Solvency Ratios Efficiency Ratios Profitability Ratios Market Prospect Ratios Coverage Ratios CPA Exam Ratios to

More information

Notes to Consolidated Balance Sheet

Notes to Consolidated Balance Sheet Notes to Consolidated Balance Sheet 1. Amounts less than one million yen have been omitted. 2. Standards for recognition and measurement of trading assets and liabilities are as follows: Recognition: Trading

More information

Predicting Bankruptcy of Manufacturing Firms

Predicting Bankruptcy of Manufacturing Firms Predicting Bankruptcy of Manufacturing Firms Martin Grünberg and Oliver Lukason Abstract This paper aims to create prediction models using logistic regression and neural networks based on the data of Estonian

More information

Rating Methodology by Sector. Non-life Insurance

Rating Methodology by Sector. Non-life Insurance Last updated: March 26, 2012 Rating Methodology by Sector Non-life Insurance *This rating methodology is a modification of the rating methodology made public on July 13, 2011, and modifications are made

More information

The following 30 questions are drawn from the Claritas supplemental study materials. The format and difficulty level are similar to what candidates

The following 30 questions are drawn from the Claritas supplemental study materials. The format and difficulty level are similar to what candidates SAMPLE QUESTIONS The following 30 questions are drawn from the Claritas supplemental study materials. The format and difficulty level are similar to what candidates experience on the live Claritas examination.

More information

Are Defined Benefit Funds still Beneficial?

Are Defined Benefit Funds still Beneficial? Are Defined Benefit Funds still Beneficial? Prepared by Greg Einfeld Presented to the Actuaries Institute Financial Services Forum 30 April 1 May 2012 Melbourne This paper has been prepared for Actuaries

More information

Why high-yield municipal bonds may be attractive in today s market environment

Why high-yield municipal bonds may be attractive in today s market environment Spread Why high-yield municipal bonds may be attractive in today s market environment February 2014 High-yield municipal bonds may be attractive given their: Historically wide spreads Attractive prices

More information